Wellington-based boutique firm Implemented Investment Solutions (IIS) has launched a first-of-its-kind fund-hosting service.
IIS, which currently manages over $1 billion as the offering entity for a range of five Russell Investments products, has already attracted expressions of interest from several investment groups in the service, according to managing director, Anthony Edmonds.
Edmonds said the IIS fund-hosting service was based on the third-party responsible entity (RE) model prevalent in Australia.
He said his team had looked across the ditch at a range of Australian fund hosts to understand both the similarities, nuances and differences between the RE model, and the work IIS has done to date with Russell Investments.
“Our conclusion was that this was a natural add-on to our business”, Edmonds said.
He said over the last few years IIS had received numerous enquiries from both local and offshore investment managers (as well as financial advisory groups) who wanted to access the NZ retail fund market but weren’t set up to deal with the quirks of New Zealand’s regulatory and tax regimes that a full product launch would trigger.
“Managers are constantly scoping out the market here, but have subsequently decided they weren’t able to, or didn’t want to set up a NZ business and launch their own funds,” he said. “After hearing their frustrations at launching in NZ it occurred to us IIS already has the fund architecture and regulatory systems in place to host multiple investment managers.”
With the Financial Markets Conduct Act (FMC) regime putting more pressure on retail product providers, Edmonds said the demand for fund-hosting was set to increase.
As well as creating an FMC-compliant platform for managers, IIS would provide solutions that offered the PIE tax benefits available to both local and offshore investors, he said.
While a number of NZ-domiciled managers – typically those housed in large conglomerates – white-label or produce NZ versions of offshore funds, Edmonds said IIS would be the first firm to specifically offer hosting as a stand-alone service.
Fund hosts, or REs in the Australian parlance, provide a range of frontline services – including legal, regulatory, investor communication and documentation – for underlying managers.
Edmonds said REs in Australia, such as Equity Trustees, typically provided the front-end wrapper for numerous managers.
IIS would continue to offer the Russell Investments Funds to NZ investors, he said.